Data Breaches Are on the Rise:
What Financial Institutions Can Do
Data breaches are becoming too common of an occurrence across various industries. Today, victims of identity theft due to fraud are at an all time high. According to the findings of the “2018 Identity Fraud: Fraud Enters a New Era of Complexity from Javelin Strategy & Research, in 2017, there were 16.7 million victims of identity fraud, a record high that followed a previous record the year before.” 1 What’s more, “between 2016 and 2017 US companies had a 7% increase in breaches, despite investing 14% more in security than they had the year prior. And although different precautionary measures have been taken, such as credit card chips, which reduced financial losses briefly, unfortunately the number of fraud victims remains the same. In fact, “the introduction of microchip equipped credit cards has only caused criminals to redirect their attention to new account fraud.” 1
The financial industry specifically, “has been a primary target for attacks by cybercriminals largely because of the tremendous value of the information available. In fact, financial services firms are reportedly hit by security incidents a staggering 300 times more frequently than businesses in other industries.” 2
And even though financial institutions are spending more than ever on cyber security, data breaches continue to exceed previous levels. 3 The breaches indicate that “ the sector as a whole doesn't appear to be becoming a whole lot more secure over time.” 3 A good example of the negative impact a data breach can have on financial institutions is the 2017 Equifax breach when 45% of American’s PII data was exposed to unauthorized viewers. 4 Due to that breach, customers are now more difficult to identify because of the increase of data made available to fraudsters. For example, knowledge-based questions have dramatically lost their value because customers’ private information has been exposed to outside sources.
Perhaps one of the most devastating outcomes of data breaches is the impact these events have on people's lives. In 2017 alone, 30% of consumers were involved in some form of fraud...representing $16.8 billion dollars of fraud losses.” 5 And $5.1 billion of that came from account takeovers—triple the amount from the year before. 6 In 2016 alone, financial losses cost consumers an average of $690 out of their own pockets. 6 These unplanned financial losses put a huge strain on consumer’s financial health and lives, forcing them to turn to other resources to make it through the situation. Due to identity theft, “60% of people had to borrow money to cover expenses, 55% missed time at work, and 49% had to rely on family or friends to make it through the situation.” 7
In an increasingly connected and data-driven world, it’s becoming more and more difficult for financial institutions to better protect their customers most sensitive information from cyber security attacks. However, all is not lost. There are solutions that financial institutions can implement to decrease the chances of fraud and identity theft. And it all starts by really getting to know customers. With a 360-degree view of customers’ financial lives, financial institutions are better equipped to spot anomalies in spending patterns and purchase behavior. When it comes down to it, gaining a better knowledge of customers enables smarter risk based decisions.
MX helps financial institutions cleanse, categorize, and classify their data more accurately so they can make better informed decisions when it comes to preventing fraud and tracking suspicious activity. Cleaner data also helps customers proactively identify fraudulent transactions on their end, allowing their financial institution to take action sooner. Supplementing existing fraud monitoring with clean and classified data will build smarter fraud models, catching fraud before it occurs.